IFRS for Small & Medium Entities Literature review

IFRS for Small & Medium Entities - Literature review Example Primarily the objectives of IFRS for SMEs have been to support its accounting and financial reporting system as well as dramatically meet the basic financial requirements of these entities which does not have any public accountability and liability to publish financial statement for its external users (Laptes & Popa, 2009). Contextually, this paper critically evaluates the need of IFRS for SMEs and the challenges in adopting IFRS for SMEs. Aims Behind Applying IFRS For SMEs The primary aim of the IFRS for SMEs is to provide a standard for entities in nations that have no national GAAP (Generally Accepted Accounting Principles). IFRS for SMEs shall not facilitate in providing accounting framework in certain specific countries for entities that do not have necessary the resources to adopt full IFRS. Another important aim of the application of IFRS is to provide those nations which have already set-up their own national GAAP with IFRS standards, a framework that shall recognise and understand the needs of accounting framework across the territories. In general, the application of IFRS in SMEs aims at providing financial statements and other financial reporting of profit-oriented entities. Accordingly, it is aimed that with the application of IFRS in SMEs shall be directed towards satisfying the common information requirements of an array of users such as shareholders, employees, creditors, and the public at large as well as facilitating single financial st andard for the preparation of financial reporting across the territories (The International Accounting Standards Committee Foundation, 2009; Madawaki, 2012). In addition to above stated aims, there are certain specific aims that are often being considered while applying IFRS in SMEs. These supplementary aims include reduction of cost for SMEs for preparing financial statements, eliminating complexity and harmonizing financial reporting by SMEs particularly private entities operating across the globe (Aristidou, 2012). Thus, it can be argued that the aims and objectives behind the IFRS implementation in SMEs are indeed wholesome and appreciable both from economic as well as accounting perspectives. Benefits of IFRS for SMEs It has been argued that IFRS for SMEs are the self-contained set of principles that comprises the accounting standards based on the Full IFRS. Additionally, it has been admitted that SMEs applying IFRS will have the significant opportunity to prepare their financi al reporting statements using a set of reliable standards which is truly based on the global financial reporting language. This will further enable SMEs to expand themselves into a new global financial dimension (Samujh, 2007). Additionally, it will also pave the way for SMEs to expand globally and increase their capability to generate greater revenue. Precisely stating IFRS for SMEs are likely to provide following benefits: Understanding the Global Financial Reporting Language: SMEs in jurisdictions where IFRS were not being historically used by those SMEs who wish to apply IFRS will became familiar with the requirement of IFRS. Moreover, the application of IFRS by SMEs will facilitate in